Senior Vice-President, Office of the CEO, Royal Bank of Canada john.stackhouse@rbc.com

Jun 27, 2017

Notes on Diversity & Inclusion

From a speech to the Dentons global partners conference, Toronto, June 16, 2017

Next weekend, Toronto will host one of the world’s largest Pride parades. The weekend after that, we’ll celebrate our 150th birthday as a country. The events are not disconnected, and that’s what I’d like to talk a bit about this morning

The city you’re visiting is profoundly different from the one that celebrated Canada’s centenary in 1967 — when homosexuality was illegal, ethnic bashing common, and the highlight of a Toronto summer was not the Pride parade but the anti-Catholic Orange parade.

That was the Toronto I can remember from my youth.

Which is all to say, change is possible.

Today, Toronto is the most multicultural city in the world. Half our population is foreign born and there are more than 200 ethnic groups living peacefully side by side

Across Canada — the new Canada — you can see the world as it might be.

In our parliament, 41 MPs are foreign born; including our immigration minister who is a refugee from Somalia. We have more Sikhs in cabinet than India does. And half our federal cabinet is female.

In Ontario, our premier is openly gay. The chair of my bank, RBC, is a woman. The CEO of our biggest competitor, TD Bank, is a Uganda-born immigrant.

And up the road at University of Toronto, a quarter of all students are from abroad.

In Canada, we call this normal.

We’re hearing a lot around the world about how it’s Canada’s time, and that somehow we are exceptional.

We’re not. We’re what the world should consider normal.

We got here by making choices — to welcome diversity AND to do something with it.

As we like to say at RBC: “Diversity is a fact. Inclusion is a choice.”

And that’s what I’d like to talk to you about this morning — the choices we all can make to ensure we’re relying on the minds of the many, rather than the few, and how that can help us tackle some of this century’s greatest challenges.

Overview

I’d like to pose three questions to you: Why diversity? Why Canada? And why now?

Why Diversity?

To begin, why diversity?

Quite simply, the world has changed

Since Canada celebrated its 100th birthday, the world has changed profoundly — through changing birth rates, global migration and technology

In just 50 years, the world’s population has more than doubled. From 3.5 billion in 1967 to 7.5 billion today

But it’s not just the massive shift in global population that’s well underway. The new great migration — a middle class migration — is reshaping the West. Because we need it to.

Without immigration, Europe’s population would today be in serious decline. Many parts of Canada are in that state, too, with a rapidly aging population that relies increasingly on the diversity of immigration for labour, tax revenue and social support.

Here’s what else has changed: we’re seeing diversity as a driver of innovation

I was in Silicon Valley last week and every time I’m there, I’m struck by its diversity

More than a third of the Valley’s population was born outside of the United States — 37.5% compared to just 13.5% for the entire U.S.

And the newcomers aren’t just employees. They’re the founders and drivers of the innovation economy that is remaking the world.

In 2016, America produced 87 so-called unicorns –new companies that had reached a value of at least $1 billion. Just over half — 44 — were founded by immigrants

Think Tesla, Uber, CloudFlare and Slack, whose founders all came from abroad.

We’re seeing this at RBC, too, in our new Artificial Intelligence lab in Toronto, where we employ 30 scientists working on the most brilliant new approaches to banking

I recently got to show the lab to the Prime Minister of Luxembourg, who was keen to see how Canadians go about innovation. We’re one of Luxembourg’s biggest employers and the government there would love to see us do more.

So we took the opportunity to show how diversity works at RBC, and why it’s fundamental to any investment we’d make anywhere.

The Prime Minister boasted about the diversity of languages one hears on the streets of Luxembourg: English, German, French, even Italian.

We ten went around the room, and each of our scientists introduced themselves and said where they were from. India, China, Russia, France, Iran, Korea, Ireland, UAE, the U.S and Greece.

Of the 30, only 7 said there were born in Canada. The other 23, including our chief science officer, come from every corner of the world.

They didn’t come here to join RBC. They came here for Canada. We got lucky and hired them.

I say lucky, because the group in just one year has conducted 15 research projects, filed 7 academic papers and applied for 3 patents.

People from different places tend to be more open to risk and more inclined to challenge the status quo. It’s why many of them moved in the first place.

Diverse teams are also more creative. They look at problems from new perspectives. And study after study shows diverse teams make better decisions

This idea of diversity as a driver of innovation is yet another reason why we have to move much more ambitiously toward gender diversity…

… in the workplace, in professions, and in the board room.

Anything short of balance is a tax on progress and a barrier to prosperity.

As you well know, because you’ve been part of it, we’ve seen some advancement.

Since 2000, female employment rates have increased in most countries and, by 2012, reached 60% or more in half of the G20 countries.

Greater participation of women in the workforce has been a key contributor to both productivity and innovation over the past quarter century.

But as we struggle with economic growth, and turn to the usual playbook — infrastructure, trade, debt-financing — we’re missing the greatest economic opportunity of the early 21st century, which is to harness the people of the 21st century.

This was demonstrated clearly in a recent study by a Canadian think tank, the Centre for International Governance Innovation, which surveyed nearly 8,000 workplaces to assess the impact of diversity on performance.

The authors found that a 1% increase in ethnocultural diversity was associated with an average 2.4% increase in revenue and a 0.5% gain in productivity. For gender, a 1% increase in diversity was associated with an average 3.5% increase in revenue and 0.7% gain in productivity.

The results were even better in knowledge-based and creative sectors, including Canadian law and banking.

Which takes me to the next question: Why Canada?

WHY CANADA?

Canada is strong in diversity, as I’ve mentioned. Our challenge is inclusion

Whether you’re country or an employer, meeting targets is important — but what makes diversity successful is just that: inclusion.

In Canada, inclusion is not the welcome mat. It’s the family room.

It’s about creating the conditions for success — for social mobility, for economic gain, for personal fulfilment.

Most Canadians agree that requires some pretty basic public goods: free and reliable healthcare. Access for every child — regardless of a parent’s legal status –to education. Affordable public transit. Community spaces and parks. Safe neighbourhoods.

Let me try to answer the question, “Why Canada?” with a name…

… Chamath Palihapitiya, and tell you a bit about his family room.

Chamath arrived in Canada in the 1980s, the son of Sri Lankan refugees who settled in Ottawa. The family lived about a laundromat. Chamath slept in the family room on a cot that every morning he had to tuck away in the hall closet.

Chamath’s father was diabetic and spent a good deal of time in hospital. His mother carried the family financially. Had they lived in the United States, they might be broke.

Instead, Chamath completed high school and won a scholarship to the University of Waterloo, where he studied engineering. Thanks to Canada’s system of coop education, he was also able to gain a series of jobs that, without any family connections, he might not have had access to.

After graduation, he went to Silicon Valley, kicked around a few startups and then helped build a new company. They called it Facebook.

Today, Chamath is an active investor, and has given a good chunk of his fortune back to Canada. You may have seen him courtside this week at the NBA championship. He’s also part owner of the Golden State Warriors.

I like to tell Chamath’s story, because I’ve heard him tell it — and heard him argue how without an inclusive society, he might still be living about a laundromat.

It’s the story of Canada.

About half of our scientists, engineers and technicians are immigrants. And their kids are doing even better

According to a 2011 report from Statistics Canada, 57% of immigrant children obtain a university degree– compared to only 37% of non-immigrant children.

But of course, inclusion doesn’t happen on its own. It’s the outcome of a series of choices. Which is why we need to be more assertive with the choices we make about the common rooms of business and whether they are indeed inclusive.

If you look at our top 500 boards, we’ve doubled female representation in just 15 years — but we’re still only at 22%. Our resources companies are at half of that, or less.

At RBC, we’re trying to lead a national conversation on this challenge and reflect on some of the good choices that can be made. The good news is, better is possible.

Since 1987, we’ve seen the female share of executive positions rise from 1%…

to 42%. And at the board level, about a third of directors are female.

How did RBC get there?

It starts at the top. We have a Diversity and Leadership Council, and the CEO chairs it.

The council sets strategy and goals and meets quarterly to assess how each part of the business is doing.

We embed gender goals into hiring initiatives throughout all levels of the bank.

We host regular career development and networking events to strengthen female candidates for pipeline positions. And we’re now encouraging female executives to join outside boards. One of our top executives, Shauneen Bruder, just joined the board of CN Rail, and they’ll be more like her.

So Why Canada? We’ve done these things not because of quotas or government mandates, but because we push, nudge and encourage each other to do better. Every organization is different and should chart its own course. But we can’t assume the course will chart itself.

That’s the Canadian way. It’s how we survive winter. It’s how we cohabitate with a restless superpower. We understand minority rights. We believe in accommodation, as long as it’s reasonable.

We’re also learning that we have to move a lot faster.

Which takes me to the last question, “Why now?”

WHY NOW

We should all feel privileged to be alive and at the confluence of the two most interesting trends of modern times. We’re at the very meeting place of a demographic revolution and a technological revolution, which together will make the world of 2067 unlike anything we know in 2017.

It’s our choice if we want to make it better.

Demographically, we’re seeing two extraordinary transitions.

First: the rise of the middle — and the mass movement of middle class residents from the global south. You just need to look at any Canadian university to see this underway.

Today, there are 400,000 international students in Canada — and acceptances are growing at many large universities by 20% or more a year.

Add to this the advancement of millennials — the biggest generation North America has seen — into middle age. Into management and partnership. And into the decision-making positions that will shape our society through the 2020s.

At the same time, we’re seeing a push for innovation that is reshaping entire societies … the digital revolution that started with the software explosion of the 1970s and followed the spread of personal computers in the 1980s, the Internet in the 1990s, mobile technology in the last decade and cloud computing in the current decade.

We think Artificial Intelligence will be more powerful than all of these in the decade ahead

Neither of these forces — demographics or technology — will be easy to manage. They pose as many risks as opportunities.

And they will require a combination of brainpower and social awareness that we’ve not seen before. In other words, diversity like we’ve not seen before — and the resilience that comes with it

History has delivered us to this stage, and presented us with a simple question…

…What will we do?

Will we embrace diversity? Will we make the choices that lead to inclusion? And will we find ways to harness this amazing moment, when humanity and technology are coming together, to build a new age of innovation that can make our world more sustainable, more engaging and more rewarding for all those who seek it?

On our streets, you’ll have noticed a slogan on those Canada150 posters. It says, “Stand for Canada.”

Take a stand.

Thank you all for taking a stand on diversity. For seeking a world that celebrates difference, and makes the choices of inclusion.